Air France to cut 1,700 jobs as losses widen

Air France-KLM has unveiled plans to cut 1,700 jobs next year after posting a worse-than-expected quarterly loss, which it blamed on fuel hedging losses and poor cargo traffic. The Franco-Dutch carrier is already cutting 3,000 jobs in the year to 31 March 2010.

The group, Europe’s largest airline, report a net loss of €147m in the quarter ending September, compared to a loss of €27m in the same period last year. It said its passenger operations would have made a profit in the period had it not been for the negative effect of its fuel hedges.

Passenger revenues were down 17.2 per cent to €4.34bn but the effects were largely offset by a 4.4 per cent reduction in capacity.

Pierre-Henri Gourgeon, Air France-KLM chief executive, said the company’s performance was improving after “deep losses” in the first quarter and that it was “adapting more rapidly than expected to the environment”.

The carrier said revenues had fallen 20 percent to €10.8bn for the six months to the end of September. It fell into an operating loss of €543m in the first half against a profit of €592m last year.

Mr Gourgeon said a “very big crisis” in the global market had hurt its cargo business, which is the biggest of all the global passenger airlines. The carrier saw a 40.5 per cent drop in cargo sales, resulting in the division reporting a €127m operating loss.

He said this division – where “competition is extremely aggressive, sometimes desperate” – would be restructured with the aim of returning to profit by 2012.

Air France lost €179m in the period from pre-2009 fuel hedges and a total of €430m in the second half. It said it had changed its policy on fuel hedges, including a shift to shorter contracts, due to the heavy losses.

The 4,500 job cuts in the year to March 2010 would reduce its global workforce to 105,000. It is planning to trim the workforce by a further 3 to 5 per cent by March 2011. The job losses would all be voluntary, it added.

Gourgeon said further cost-cutting should help lift operating profits by €500m in the financial year to the end of March 2012.